Toshiba signs final deal to sell unit
• Agreement formalised with consortium led by Bain Capital after months of negotiation and despite venture partner’s vow to fight it
Toshiba has signed a final agreement to sell its flash memory chip business to a group led by Bain Capital for about ¥2-trillion ($18bn), moving a step closer to completing the deal after months of contentious negotiations.
Toshiba has signed a final agreement to sell its flash memory chip business to a group led by Bain Capital for about ¥2-trillion ($18bn), moving a step closer to completing the deal after months of negotiation.
The Bain consortium includes large technology players Apple, Dell, SK Hynix and Japan’s Hoya. Toshiba itself would maintain a stake, the company said on Thursday.
The total value of the transaction may change, depending on capital expenditure.
The deal is aimed at keeping control of an important business in Japan, while securing the funding needed to help Toshiba repair its balance sheet.
The sale has been marked by fierce tension between Toshiba and Western Digital, its partner in the chips business.
The US company has argued it should have veto rights in any sale because of their joint ventures and it tried to buy the business itself. Toshiba disputes that its partner has such rights and solicited offers from a range of bidders including Western Digital’s rivals. The US company has already vowed to fight the sale to Bain through arbitration filings in the US.
True to the deal’s tumultuous nature, Bain called a media conference at Tokyo’s Palace Hotel on Thursday evening, only to cancel it as journalists arrived. The firm’s Japan chief explained its partners had not all signed off on the event.
“We thought we could call for the briefing first and get everyone’s agreement in the meantime, but couldn’t,” said Yuji Sugimoto, head of Bain Capital in Japan. However, he said that all parties were in agreement regarding the deal.
Toshiba is under pressure to raise money by March to pay for billions of dollars in losses in its US nuclear business — or see its shares delisted from the Tokyo Stock Exchange.
Toshiba expects the deal to close by March 31.
The signing of the agreement is a step towards completing a deal that has gone through many twists since January. Bain had been selected as the preferred bidder in June but could not reach a final agreement because state-sponsored Innovation Network Corporation of Japan and Development Bank of Japan backed out of the private equity firm’s consortium.
Apple played a central role in resolving the auction by providing financial support and continuing demand. The iPhone maker is keen on the chip unit because of the importance of flash memory chips, used in iPhones and iPads for storing photographs, videos and other data.
Only a handful of companies make the highest-end technology and the dominant player is Samsung Electronics, which controls about 40% of the global market for flash memory.
Investing in the Toshiba unit helps keep the market competitive and improves Apple’s negotiating position.
Apple was investing ¥165bn in Toshiba as part of the deal, the iPhone maker said. It would receive an equity stake in return for the investment.
“Toshiba has been an important partner to Apple for many years and we’re proud to support the next phase of their development,” Apple said.
Bain, meanwhile, is betting on rising demand and rising prices for chips in a market with only a handful of players that can afford to build plants.
Western Digital reiterated its legal threat in the past week as Toshiba signalled it was close to a deal with Bain. The US firm warned that legal proceedings could drag on until 2019 and put the deal in jeopardy. It also plans an injunction to block the sale.
The Bain agreement calls for the sale to be consummated even if the litigation is unresolved. If that is the case, Toshiba will not transfer its three joint ventures with Western Digital to the acquirers and the purchase price will be adjusted accordingly, unless the transfer of the memory business itself is blocked by injunction, according to the statement.